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18-0313 Tuesday “Daily Bugle”

18-0313 Tuesday “Daily Bugle”

Tuesday, 13 March 2018

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The Daily Bugle is a free daily newsletter from Full Circle Compliance, containing changes to export/import regulations (ATF, DOE/NRC, Customs, NISPOM, EAR, FACR/OFAC, FAR/DFARS, FTR/AES, HTSUS, and ITAR), plus news and events.  Subscribe 
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[No items of interest noted today.] 

  1. Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.)
  3. DoD/DSCA Releases Policy Memo 18-17
  4. State/DDTC: (No new postings.)
  5. President Continues National Emergency Concerning Iraq
  6. EU Amends Restrictive Measures Concerning Central African Republic and Situation in Ukraine
  1. Defense One: “How Much Do America’s Arms Makers Depend on Foreign Metal? No One Seems to Know”
  2. Expeditors News: “11 Countries Sign Comprehensive and Progressive Agreement for Trans-Pacific Partnership”
  1. M. Volkov: “Sapin II and French Anti-Corruption Enforcement”
  2. Gary Stanley’s EC Tip of the Day
  1. ECS Announces “ITAR/EAR Beyond the Basics” on 20-21 Mar in San Diego, CA
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Latest Amendments: ATF (15 Jan 2016), Customs (22 Feb 2018), DOD/NISPOM (18 May 2016), EAR (16 Feb 2018), FACR/OFAC (5 Mar 2018), FTR (20 Sep 2017), HTSUS (27 Feb 2018), ITAR (14 Feb 2018) 
  3. Weekly Highlights of the Daily Bugle Top Stories 

EXIMITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a1


[No items of interest noted today.]

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OGSOTHER GOVERNMENT SOURCES

OGS_a11. Items Scheduled for Publication in Future Federal Register Editions
(Source: Federal Register)

* President; ADMINISTRATIVE ORDERS; Iran; Continuation of National Emergency (Notice of March 12, 2018) [Publication Date: 14 March 2018.]

[Editor’s Note: The item is already included in today’s Daily Bugle, item 5.]

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(Source:
DoD/DSCA, 13 Mar 2018.)
 
  – This memo updates the previous transportation costs look-up table, and is found at A2 – Transportation Cost Look-Up Tables – CY-18.
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(Source:
The White House, 12 Mar 2018.)
 
On March 15, 1995, by Executive Order 12957, the President declared a national emergency with respect to Iran to deal with the unusual and extraordinary threat to the national security, foreign policy, and economy of the United States constituted by the actions and policies of the Government of Iran. On May 6, 1995, the President issued Executive Order 12959, imposing more comprehensive sanctions on Iran to further respond to this threat. On August 19, 1997, the President issued Executive Order 13059, consolidating and clarifying those earlier orders. The President took additional steps pursuant to this national emergency through Executive Order 13553 of September 28, 2010, Executive Order 13574 of May 23, 2011, Executive Order 13590 of November 20, 2011, Executive Order 13599 of February 5, 2012, Executive Order 13606 of April 22, 2012, Executive Order 13608 of May 1, 2012, Executive Order 13622 of July 30, 2012, Executive Order 13628 of October 9, 2012, and Executive Order 13645 of June 3, 2013.
 
On July 14, 2015, the P5+1 (China, France, Germany, Russia, the United Kingdom, and the United States), the European Union, and Iran agreed to a Joint Comprehensive Plan of Action (JCPOA) to ensure that Iran’s nuclear program remains exclusively peaceful. On January 16, 2016, Implementation Day under the JCPOA, the United States lifted nuclear-related sanctions on Iran, by terminating a number of Executive Orders that had been issued pursuant to this national emergency and by taking other actions. Though these measures constitute a significant change in our sanctions posture, comprehensive non-nuclear-related sanctions with respect to Iran remain in place.
 
Actions and policies of the Government of Iran, including its development of ballistic missiles, support for international terrorism, and human rights abuses continue to pose an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States.
 
For this reason, the national emergency declared on March 15, 1995, must continue in effect beyond March 15, 2018. Therefore, in accordance with section 202(d) of the National Emergencies Act (50 U.S.C. 1622(d)), I am continuing for 1 year the national emergency with respect to Iran declared in Executive Order 12957. The emergency declared by Executive Order 12957 constitutes an emergency separate from that declared on November 14, 1979, by Executive Order 12170, in connection with the hostage crisis. This renewal, therefore, is distinct from the emergency renewal of November 2017.
 
This notice shall be published in the Federal Register and transmitted to the Congress.
 
DONALD J. TRUMP
THE WHITE HOUSE,
March 12, 2018.
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Regulations:
  – Council Regulation (EU) 2018/387 of 12 March 2018 amending Regulation (EU) No 224/2014 concerning restrictive measures in view of the situation in the Central African Republic.
  – Council Implementing Regulation (EU) 2018/388 of 12 March 2018 implementing Regulation (EU) No 269/2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine.
 
Decisions:
  – Council Decision (CFSP) 2018/391 of 12 March 2018 amending Decision 2013/798/CFSP concerning restrictive measures against the Central African Republic.
  – Council Decision (CFSP) 2018/392 of 12 March 2018 amending Decision 2014/145/CFSP concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine.
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NWSNEWS

NWS_a1
7. Defense One: “How Much Do America’s Arms Makers Depend on Foreign Metal? No One Seems to Know”
(Source: Defense One, 12 Mar 2018.)
 
Certainly, no one seemed concerned about it until Trump’s tariffs sent them scrambling to find out.
 
No one knows how the
U.S. military and its weapons suppliers will be affected by President Trump’s surprise tariffs on imported steel and aluminum, because no one seems to know how much foreign metal is in America’s weapons.
 
  “I’ve asked because I’m interested,” Lockheed Martin CFO Bruce Tanner said March 5.  
Defense executives like Tanner have worked for decades to craft to global supply chains and an
industrial base that is intertwined with key allies
. But with the approach of these unexpected tariffs, which are forecast to hurt American companies from beer brewers to automakers,  numerous interviews and conversations with executives, employees, and industrial base experts indicate that the defense industry doesn’t know its own exposure.
And if the Pentagon does, it’s not saying. 

Speaking alongside representatives from the U.K., Canada, and Australia on Friday at the Center for Strategic and International Studies, Jerry McGinn, the principal deputy director of the Office of Manufacturing and Industrial Base Policy at the Pentagon, said the Pentagon provided “input on DoD demand” to a Commerce Department investigation, but declined to say how much foreign steel and aluminum was used in U.S. weapons.
 “We look at materials and metals in our industrial base analysis all the time to understand [and] maintain that we have enough to support our major programs and systems,” McGinn said.
 
Trump justified the protectionist measures under international trade law by saying they were necessary for national security.  
“DoD does not believe that the findings in the reports impact the ability of DoD programs to acquire the steel·or aluminum necessary to meet national defense requirements,” Defense Secretary James Mattis wrote in a letter to Commerce Department Secretary Wilbur Ross.
 
But the Aerospace Industries Association – which represents major defense firms – has voiced a full-throated opposition to the tariffs. “Our industry employs 2.4 million people and produced a trade surplus of $86 billion last year,” Eric Fanning, AIA’s president and CEO, said in a statement. “Tariffs on aluminum and steel would jeopardize that surplus and put those jobs at risk.” The tax on aluminum alone “would create almost $2 billion in unnecessary costs to U.S. manufacturing,” Fanning said.

For Tanner’s Lockheed, the big question is how the aluminum tariffs could affect the price of the F-35 Joint Strike Fighter, an expensive plane with a sprawling supply chain that touches four continents. Much of the plane’s aluminum is forged by U.S-based Alcoa, but some comes from Canada, America’s No. 1 foreign supplier of the metal. An October 2017 report posted on a Lockheed-run F-35 website says Canadian companies have received near $5.5 million in contracts between 2009 and 2017 for “Alumina and aluminum production and processing.”
 
Tanner says Lockheed uses more aluminum than steel on its aircraft projects, which in addition to the F-35, include the C-130 cargo plane, and F-16 fighter. And the F-35 uses more titanium than aluminum and steel, he said.
 
Lockheed has aluminum purchasing agreements in place for the next three years, Tanner said.  
“We negotiate long-term purchase agreements,” he said. “In the case of F-35, we’re already negotiated out until 2021. There’s no impact, at least, until post-2021 sort of no matter what happens near-term. It affects our suppliers, but it doesn’t affect the pricing that we’ve negotiated for our supply chain.”
 
Update: Lockheed Martin does “not expect these tariffs to have a significant direct impact” on its programs “because we procure most of our materials through long-term agreements,” Bill Phelps, a company spokesman said in an email Monday. “We will, however, continue to evaluate the impact on our supply chain, which could be more directly and immediately affected – potentially driving up costs and leading to delays in delivery of these materials for our products. We’re encouraged that the president’s proclamation excludes Canada, which is a key ally and plays a critical role in support of U.S. national security programs.”
 
Still, investors fear that those suppliers will pass any increased cost back to Lockheed further down the road. That could end or even reverse a years-long trend of dropping F-35 price tags.

  “If the Trump administration implements the steel and aluminum tariffs,” Roman Schweizer, an aerospace and defense analyst with Cowen and Company, wrote in a March 6 note to investors, “we find it difficult to imagine that it would not have an impact with major allies such as Canada, Germany, Japan and South Korea.”
 
Analysts with Citi, however, said the tariffs’ effect would be muted by exclusion clauses for Canada, Mexico and possibly others; an ongoing trend of using less steel and aluminum in aerospace and defense products; and long-term supply agreements like the ones Tanner described.
 
And some defense products are made solely with U.S. steel anyway. Lockheed’s shipbuilding division, which makes Littoral Combat Ships for the U.S. Navy, buys its steel from two American suppliers, said Dale Bennett, executive vice president of Lockheed’s Rotary and Mission Systems division. That division includes shipbuilding, Sikorsky helicopters, and high-tech missile defense radars.
 
  “That program’s pretty good,” he said of the Littoral Combat Ship. “I have to do a lot of other analysis across the portfolio.”

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NWS_a2
8. Expeditors News: “11 Countries Sign Comprehensive and Progressive Agreement for Trans-Pacific Partnership”
(Source: Expeditors News, 12 Mar 2018.)
 
On March 8, 2018, representatives of Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam, signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
 
The signatory countries will now need to complete their domestic processes to bring the CPTPP into force.
 
The Canadian press release may be found here.

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COMMCOMMENTARY

COMM_a01
9. M. Volkov: “Sapin II and French Anti-Corruption Enforcement”
(Source: Volkov Law Group Blog, 12 Mar 2018. Reprinted by permission.)
 
* Author: Michael Volkov, Esq., Volkov Law Group, mvolkov@volkovlaw.com, 240-505-1992.
 
As more countries enter into the anti-corruption enforcement world, companies face exponential risks of detection and enforcement.
 
Recently, Deputy Attorney General Rosenstein has commented on the need to avoid unfair enforcement actions by multiple jurisdiction based on a single course of conduct.  This approach has been reflected in FCPA enforcement actions involving multiple countries and resulting in division of fines and penalties.

The United States has coordinated enforcement investigations and settlements with Brazil, Swiss, Dutch, German, Swedish and other prosecutors.  This strategy is an outgrowth of law enforcement efforts to coordinate, share best practices and conduct joint training sessions.
 
In November 2016, the French enacted Sapin II as its new global anti-corruption tool.  The law became effective on December 11, 2016.  Sapin II requires global companies to implement effective anti-corruption compliance programs.
 
The law creates a new anti-corruption agency and applies to companies that have 500 or more employees (or have a parent company in France with 500 or more employees), and whose annual turnover is 100 million Euro.  Companies that fall under the new law are mandated to implement a compliance program.  The French anti-corruption agency has broad powers to ensure that companies implement a compliance program.
 
Any company that does not implement or improve a compliance program as required is subject to fines. Directors also can be held liable for failure to implement a compliance program.
 
The Sapin II law requires that companies implement the following eight measures relating to compliance:
 
  (1) A code of conduct defining prohibited conduct, including bribery or influence peddling.
  (2) An internal reporting system for employees to report potential violations of the code of conduct.
  (3) A risk map, which is regularly updated, and designed to identify, analyze and risk rank a company’s exposure to bribery risks.
  (4) A bribery risk assessment of clients, vendors/suppliers and third-party intermediaries.
  (5) The design, implementation and continuing assessment of financial accounting controls to ensure that the company’s books and records are accurate and not used to disguise bribery payments.
  (6) Anti-bribery training for managers and employees who may be at risk to engage in bribery or influence peddling.
  (7) Maintenance of a disciplinary program to punish employees that violate the company’s code of conduct or other compliance policies and procedures.
  (8) A system of internal controls that will ensure the efficiency of the compliance program, and that can be assessed on a continuing basis.
 
Aside from the mandated compliance program, the Sapin II law creates a new criminal offense for influence peddling of foreign public officials, expands the French criminal courts’ jurisdiction, and establishes a new deferred prosecution scheme.
 
Under the new law, a company or individual can be held criminally liable if it offers a donation, gift or reward to induce a foreign public official to abuse his real or alleged influence in order to obtain employment, contracts or any other favorable decision from a public authority or foreign government. The criminal offense is punishable by up to 5 years’ imprisonment and a fine of 500,000 Euros.
 
The Sapin II law has extraterritorial application outside of France. French citizens and foreign nationals who reside in France can be prosecuted in French courts for bribery and influence peddling committed abroad.
 
Finally, the Sapin II law authorizes the prosecutors to enter into agreements akin to deferred prosecution agreements, which can be offered to any company or person. Under this new agreement procedure, the fine imposed on the company may be up to 30 percent of its average annual turnover within the last three years at the time the offense was committed. The agreement has to be validated by the French Tribunal after a public hearing.

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* Author: Gary Stanley, Esq., Global Legal Services, PC, (202) 352-3059,
gstanley@glstrade.com
.
 
License requirements under the EAR are determined solely by the classification, end-use, end-user, ultimate destination, and conduct of U.S. persons. Supplement No. 3 to EAR Part 732 – – BIS’s “Know Your Customer” Guidance and Red Flags” is intended to provide helpful guidance regarding the process for the evaluation of information about customers, end-uses, and end-users. General Prohibition Ten (Knowledge Violation to Occur) prohibits anyone from proceeding with a transaction with knowledge that a violation of the EAR has occurred or is about to occur. It also prohibits related shipping, financing, and other services. General Prohibition Ten applies to all items subject to the EAR, i.e. both items on the CCL and within EAR99.

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TEEX/IM TRAINING EVENTS & CONFERENCES

TE_a111. ECS Announces “ITAR/EAR Beyond the Basics” on 20-21 Mar in San Diego, CA

(Source: Suzanne Palmer, spalmer@exportcompliancesolutions.com)
 
* What: ECS Presents ITAR/EAR Beyond the Basics, Establishing A Rock-solid Export Compliance Program
* When: March 21-22, 2018
* Sponsor: Export Compliance Solutions (ECS)
* ECS Speaker Panel: Suzanne Palmer, Lisa Bencivenga
* Register HERE or by calling 866-238-4018 or e-mail spalmer@exportcompliancesolutions.com.
* Discount: Daily Bugle subscribers get a 10% discount when they use the coupon code: ECS10PERBUGLE when registering for this event.
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ENEDITOR’S NOTES

 
* Augustus Hare (Augustus John Cuthbert Hare; 13 Mar 1834 – 22 Jan 1903; was an English writer, artist, and raconteur. Hare was the author of a large number of books, which fall into two classes: biographies of members and connections of his family, and descriptive and historical accounts of various countries and cities.)
  – “Crimes sometimes shock us too much; vices almost always too little.”
 

Aeschylus
 (525/524 BC – 456/455 BC (dates uncertain); was an ancient Greek philosopher and playwright, often described as the father of tragedy. Academics’ knowledge of the genre begins with his work. Valerius Maximus wrote that he was killed outside the city by a tortoise dropped by an eagle which had mistaken his head for a rock suitable for shattering the shell of the reptile. Pliny, in his Naturalis Historiæ, adds that Aeschylus had been staying outdoors to avoid a prophecy that he would be killed by a falling object.)
  – “Everyone’s quick to blame the alien.”

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EN_a313
. Are Your Copies of Regulations Up to Date?
(Source: Editor)

The official versions of the following regulations are published annually in the U.S. Code of Federal Regulations (C.F.R.), but are updated as amended in the Federal Register.  The latest amendments to applicable regulations are listed below.
 
*
ATF ARMS IMPORT REGULATIONS
: 27 CFR Part 447-Importation of Arms, Ammunition, and Implements of War
  – Last Amendment: 15 Jan 2016: 81 FR 2657-2723: Machineguns, Destructive Devices and Certain Other Firearms; Background Checks for Responsible Persons of a Trust or Legal Entity With Respect To Making or Transferring a Firearm. 
 
*
CUSTOMS REGULATIONS
: 19 CFR, Ch. 1, Pts. 0-199
  – Last Amendment: 22 Feb 2018: 83 FR 7608-7610: Technical Amendment to List of User Fee Airports: Name Changes of Several Airports and the Addition of Five Airports
 
DOD NATIONAL INDUSTRIAL SECURITY PROGRAM OPERATING MANUAL (NISPOM): DoD 5220.22-M

  – Last Amendment: 18 May 2016: Change 2
: Implement an insider threat program; reporting requirements for Cleared Defense Contractors; alignment with Federal standards for classified information systems; incorporated and cancelled Supp. 1 to the NISPOM (Summary 
here
.)


EXPORT ADMINISTRATION REGULATIONS (EAR)
: 15 CFR Subtit. B, Ch. VII, Pts. 730-774

  – Last Amendment: 
16 Feb 2018:
83 FR 6949-6956
: Russian Sanctions: Addition of Certain Entities to the Entity List [Addition of 21 Entities to Entity List.]

  
*
FOREIGN ASSETS CONTROL REGULATIONS (OFAC FACR)
: 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders

  – Last Amendment: 5 Mar 2018:
83 FR 9182-9204: North Korea Sanctions Regulations

 
*
FOREIGN TRADE REGULATIONS (FTR)
: 15 CFR Part 30
  – Last Amendment:
20 Sep 2017:
 
82 FR 43842-43844
: Foreign Trade Regulations (FTR): Clarification on Filing Requirements; Correction
 
  – HTS codes that are not valid for AES are available
here.
  – The latest edition (1 Jan 2018) of Bartlett’s Annotated FTR (“BAFTR”), by James E. Bartlett III, is available for downloading in Word format. The BAFTR contains all FTR amendments, FTR Letters and Notices, a large Index, and footnotes containing case annotations, practice tips, Census/AES guidance, and to many errors contained in the official text. Subscribers receive revised copies every time the FTR is amended. The BAFTR is available by annual subscription from the Full Circle Compliance website.  BITAR subscribers are entitled to a 25% discount on subscriptions to the BAFTR.
 
*
HARMONIZED TARIFF SCHEDULE OF THE UNITED STATES (HTS, HTSA or HTSUSA)
, 1 Jan 2018: 19 USC 1202 Annex. (“HTS” and “HTSA” are often seen as abbreviations for the Harmonized Tariff Schedule of the United States Annotated, shortened versions of “HTSUSA”.)
  –
Last Amendment: 27 Feb 2018:
Harmonized System Update 1802
, containing 164 ABI records and 38 harmonized tariff records.

  – HTS codes for AES are available here.
  – HTS codes that are not valid for AES are available here.

 
INTERNATIONAL TRAFFIC IN ARMS REGULATIONS (ITAR): 22 C.F.R. Ch. I, Subch. M, Pts. 120-130.

  – Last Amendment: 14 Feb 2018: 83 FR 6457-6458: Amendment to the International Traffic in Arms Regulations: Addition of South Sudan [Amends ITAR Part 126.] 

  – The only available fully updated copy (latest edition: 14 Feb 2018) of the ITAR with all amendments is contained in Bartlett’s Annotated 
ITAR

(“BITAR”)
, by James E. Bartlett III. The BITAR contains all ITAR amendments to date, plus a large Index, over 800 footnotes containing amendment histories, case annotations, practice tips, DDTC guidance, and explanations of errors in the official ITAR text. Subscribers receive updated copies of the BITAR in Word by email, usually revised within 24 hours after every ITAR amendment.
 The BITAR is available by annual subscription from the Full Circle Compliance
 
website
. BAFTR subscribers receive a 25% discount on subscriptions to the BITAR, please
contact us
to receive your discount code.

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EN_a0314
Weekly Highlights of the Daily Bugle Top Stories

(Source: Editor) 

Review last week’s top Ex/Im stories in “Weekly Highlights of the Daily Bugle Top Stories” published 
here

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EPEDITORIAL POLICY

* The Ex/Im Daily Update is a publication of FCC Advisory B.V., compiled by: Editor, James E. Bartlett III; Assistant Editors, Alexander P. Bosch and Vincent J.A. Goossen; and Events & Jobs Editor, John Bartlett. The Ex/Im Daily Update is emailed every business day to approximately 8,000 readers of changes to defense and high-tech trade laws and regulations. We check the following sources daily: Federal Register, Congressional Record, Commerce/AES, Commerce/BIS, DHS/CBP, DOE/NRC, DOJ/ATF, DoD/DSS, DoD/DTSA, FAR/DFARS, State/DDTC, Treasury/OFAC, White House, and similar websites of Australia, Canada, U.K., and other countries and international organizations.  Due to space limitations, we do not post Arms Sales notifications, Denied Party listings, or Customs AD/CVD items.

* RIGHTS & RESTRICTIONS: This email contains no proprietary, classified, or export-controlled information. All items are obtained from public sources or are published with permission of private contributors, and may be freely circulated without further permission, provided attribution is given to “The Export/Import Daily Bugle of (date)”. Any further use of contributors’ material, however, must comply with applicable copyright laws.

* CAVEAT: The contents of this newsletter cannot be relied upon as legal or expert advice.  Consult your own legal counsel or compliance specialists before taking actions based upon news items or opinions from this or other unofficial sources.  If any U.S. federal tax issue is discussed in this communication, it was not intended or written by the author or sender for tax or legal advice, and cannot be used for the purpose of avoiding penalties under the Internal Revenue Code or promoting, marketing, or recommending to another party any transaction or tax-related matter.


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